Question

Respond to the following in a minimum of 175 words: Briefly discuss four types of organizational budgets.

Answer 1

Types of organizational budgets

1) Cash budget - This budget give an estimate of all cash receipts and cash expenditure which are expected by the organisation to be incurred during the period. This budget give the liquidity of funds of the organisation and helps the organisation to make decision regarding the funds available with them.

2) Operating budget - This budget give the forecast regarding the revenue and expenditure expected for the period this type of budget is generally prepared by the management at the beginning of the year so that the management can give the expected level of activity of the organisation and the planning to the whole organisation. Budget consists of cost of goods sold the payroll and inventory.

3) Financial Budget - This budget health organisation to allocate the resources available with them on the basis of short term and long term funds. This budget give the prediction regarding the income and expenditure which is to be incurred or gained from the investments made by the company. This budget also help the organisation to take better decisions in regarding investing the surplus fund so as to maximize the profit of the organisation. It is one of the crucial budget for the shareholders as they are very keen to know about the investment made by the company.

4) Master Budget - This budget is the aggregation of all the above explained budgets. This budget give the central planning tool to the management which includes all the analysis and terms used in the budget which are explained above. Also this budget is used by the management in order to take strategic decision for the long term basis.

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